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Optimal Carbon Capture and Storage Policies

  • Ayong Le Kama, Alain
  • Fodha, Mouez
  • Lafforgue, Gilles

Following the IPCC's report (2005), which recommended the development and the use of carbon capture and sequestration (CCS) technologies in order to achieve the environmental goals, defined by the Kyoto Protocol, the issue addressed in this paper concerns the optimal strategy regarding the long-term use of CCS technologies. The aim of this paper is to study the optimal carbon capture and sequestration policy. The CCS technologies has motivated a number of empirical studies, via complex integrated assessment models. This literature always considers that the existing technology allows sequestrating a fraction of the carbon emissions and concludes that the early introduction of sequestration can lead to a substantial decrease in the cost of environmental externality. But, the level of complexity of such operational models, aimed at defining some specific climate policies. We develop a very simple growth model so as to obtain analytical and tractable results and therefore exhibit the main driving forces that should determine the optimal CSS policy. We show within on the cost of extractions, CSS may be a long-term solution for the carbon emissions problem. Besides, it is also shown that the social planner will optimally choose to decrease the rate of capture and sequestration. Besides, we also introduce the decentralization of this simple economy, by considering the individual program of the fossil resource-holder and the one of the representative consumer. This helps us to compute analytically the optimal environmental policy, that is the also the optimal fossil fuel price profile.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-095.

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Date of creation: 02 Oct 2009
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Handle: RePEc:tse:wpaper:22199
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  1. Grimaud, André & Rougé, Luc, 2008. "Séquestration du carbone et politique climatique optimale," IDEI Working Papers 540, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
  3. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2009. "Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis," TSE Working Papers 09-063, Toulouse School of Economics (TSE).
  4. LAFFORGUE Gilles & MAGNE Bertrand & MOREAUX Michel, 2007. "Energy Substitutions, Climate change and Carbon sinks," LERNA Working Papers 07.01.222, LERNA, University of Toulouse.
  5. repec:hal:journl:halshs-00206513 is not listed on IDEAS
  6. Alain Ayong Le Kama & Mouez Fodha, 2008. "Optimal nuclear waste burial policy under uncertainty," Documents de travail du Centre d'Economie de la Sorbonne v08092, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. Lionel Ragot & Katheline Schubert, 2006. "The optimal carbon sequestration in agricultural soils : does the dynamics of the physical process matter ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00115685, HAL.
  8. Frederick Ploeg & Cees Withagen, 1991. "Pollution control and the Ramsey problem," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(2), pages 215-236, June.
  9. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
  10. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November.
  11. Alain Ayong Le Kama & Katheline Schubert, 2006. "Ressources renouvelables et incertitude sur lespréférences des générations futures," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00206513, HAL.
  12. Alain Ayong Le Kama, 2012. "Preservation and Endogenous Uncertain Future Preferences," Working Papers 1204, Chaire Economie du Climat.
  13. Alain Le Kama & Katheline Schubert, 2004. "Growth, Environment and Uncertain Future Preferences," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(1), pages 31-53, May.
  14. John Hartwick, 1977. "Intergenerational Equity and the Investment of Rents from Exhaustible Resources in a Two Sector Model," Working Papers 281, Queen's University, Department of Economics.
  15. Reyer Gerlagh, 2006. "ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 223-240.
  16. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  17. repec:inr:wpaper:21821 is not listed on IDEAS
  18. repec:hal:journl:hal-00267891 is not listed on IDEAS
  19. Kurosawa, Atsushi, 2004. "Carbon concentration target and technological choice," Energy Economics, Elsevier, vol. 26(4), pages 675-684, July.
  20. Edmonds, Jae & Clarke, John & Dooley, James & Kim, Son H. & Smith, Steven J., 2004. "Stabilization of CO2 in a B2 world: insights on the roles of carbon capture and disposal, hydrogen, and transportation technologies," Energy Economics, Elsevier, vol. 26(4), pages 517-537, July.
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